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Allen v. US Bank (In re Allen)

Allen v. US Bank (In re Allen). - B.R. - (9th Cir. B.A.P. June 8, 2012)
The Bankruptcy Appellate Panel for the Ninth Circuit held USB, the secured creditors chain of possession for loan documents were adequate to establish standing to file a proof of claim.
Procedural context:
The Bankruptcy Court heard the issues regarding Amended Proof of Claim and, without objection, USB entered its evidence regarding the chain of possession. The Bankruptcy Court held that the Amended Proof of Claim was valid. Debtor's appeal. On appeal certain issues are reviewed de novo, including whether a party has standing. Other issues on appeal are reviewed for clear error.
Arnold John Allen, Jr. and Kimberly Faith Allen ("Debtors") filed a Chapter 13 including a Plan that listed ownership of their residence. Instead of listing a lien against the residence, the disputed lienholder was listed as unsecured. Wells Fargo filed a timely Proof of Claim as a secured creditor with a lien against the residence. The Debtors objected on the grounds that Wells Fargo was not the lender, that the allonge (which demonstrated transfer of ownership) was not attached to the note and appeared to be created after the fact, and that Wells Fargo did not have the right to enforce the loan documents nor was the holder of the note. About a month later, USB, the Trustee for the pool of notes at issue, filed an amended proof of claim and demonstrated the chain of possession and explained the irregularities of the chain of possession. USB also asserted standing because the original Note was endorsed in blank. The Debtors renewed their objection and challenged USB's chain of possession. SOLE ISSUE: Whether USB is the correct secured creditor with a lien against Debtor's residence. As discussed in in re Veal, if a "person entitled to enforce the note" as provided in UCC 3-301, that same person has standing to file a proof of claim in a bankruptcy. 450 B.R. 897 (9th Cir. BAP 2011). Under the Washington Code, there are three ways to establish the ability to enforce a note. This creditors' claim was sufficient because at the time the loan documents were lost, pursuant to the UCC, the Creditor took sufficient steps and had adequate documentation to remedy the lost documents. The Court went on to hold that if you had the right to enforce a Deed of Trust, then you had the right to assign your right to enforce a Deed of Trust. Any facts of the case were not disturbed under the clearly erroneous standard.
Pappas, Dunn, and Hollowell, Bankruptcy Judges

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